Depreciation of Labor in Property Insurance Claims: Guidance From Recent Cases

Recent decisions are in conflict on whether labor costs may be depreciated in valuing property losses. For example, one court found recently that an insurer breached its obligations under an ACV valuation provision by depreciating mixed costs (costs representing both labor and materials) in a claim for hail damage and that by doing so, the insurer improperly depreciated the cost of labor. Other courts, however, have allowed the depreciation of labor costs. For example, labor costs for installing a new roof after hail damage were deemed "replacement costs" and were depreciable under a property insurance policy defining reimbursable "actual cash value" as "replacement cost of the property at the time of loss less depreciation."

Listen as our authoritative panel of insurance practitioners analyzes whether labor costs and other non-physical cost items, such as contractor overhead and profit, should be depreciated in reaching an ACV adjustment of a property insurance claim. The panel will also address issues involved from both policyholder and insurer perspectives, discuss ongoing litigation and recent decisions, and demonstrate compelling arguments in advocating for or against these claims.

1. Overview
2. Recent cases
3. Policyholder perspectives
4. Insurer perspectives
5. Best practices and case studies
6. Final considerations

The panel will review these and other key issues:

• Which jurisdictions generally allow for depreciation of labor in property claims?
• What are the most important lessons from recent cases?
• What are compelling arguments in advocating for or against these claims?